Why Shares of Aerovironment, Inc. Plunged 18% Today

What happened

Shares of drone-maker Aerovironment, Inc. (NASDAQ: AVAV) fell as much as 17.7% in trading Wednesday after reporting fiscal third-quarter earnings. The stock didn't see much in the way of a recovery as the day went on, with shares down 16.5% at 12:45 p.m. EST.

So what

Results weren't as bad as the stock's move makes it seem. Revenue for the fiscal quarter was up 20% versus a year ago, to $63.9 million, topping the $63 million expected by analysts. On the bottom line, net loss was $0.8 million, or $0.04 per share, including a one-time $3.1 million expense related to the Tax Cut and Jobs Act of 2017, which was passed in December. Without that expense, earnings would have been $0.09 per share, topping the $0.05 estimate from Wall Street.

The outlook seems to be what's catching investors a little off guard today. Aerovironment said it expects $280 million to $300 million of revenue and earnings of $0.45 to $0.65 per share for the full fiscal year. That's at the low end of the $298.1 million average estimate from analysts and well below the $0.69 in earnings that Wall Street is expecting.

Now what

The weaker-than-expected guidance shouldn't alarm investors because Aerovironment's business still is doing very well overall. Funded backlog was $123.5 million at the end of the third quarter compared to $78.0 million at the beginning of the fiscal year, showing the strength in orders. Now that the wind is at the back of leaders in the drone industry, today's stock plunge may be a buying opportunity for those eyeing Aerovironment stock.

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Travis Hoium owns shares of AeroVironment. The Motley Fool recommends AeroVironment. The Motley Fool has a disclosure policy.